Final Rslts/Tender Offer,etc
Redrow Group PLC
12 September 2000
PRESS RELEASE
Redrow Group plc today announced its Preliminary Results for the 12 months to
June 2000, and a tender offer to return surplus capital to shareholders.
* Profit before tax up 21% to £67.2m (1999: £55.6m).
* Earnings per share up 22% to 22.5p (1999: 18.5p).
* Full year dividend of 4.95p up 10%.
* Return on capital employed maintained at 28%.
* Current land bank increased to 13,500 plots (1999: 12,300 plots).
* Tender offer to return surplus capital to shareholders.
Steve Morgan, Chairman commented:-
'I am delighted to be reporting another year of record performance for the
Group. Pre-tax profits have increased by 21% in the twelve months to June
2000, maintaining the Group's record of 21% compound growth rate during our
six years as a public company and providing a strong platform from which to
deliver consistent value to our shareholders.
As a further enhancement to shareholder value, we are announcing a tender
offer for 30% of the shares. The Board considers this to be the best
mechanism of returning surplus capital to shareholders.
Redrow has never been in better shape. The company enjoys a superb
reputation for quality, an outstanding product, a four year low cost current
landbank and a record that compares with the best in the industry. Looking
forward, I foresee a steady housing market which, combined with the return of
capital announced today, should deliver enhanced earnings growth for
shareholders.
After founding Redrow twenty-six years ago the time is right in my
professional life for a change. I feel it is the appropriate moment to hand
over the Chairmanship to Robert Jones who has been a Non-Executive Director
for the last three years. I am extremely confident that the management team
will continue to achieve outstanding results.'
For further information contact:
Steve Morgan, Chairman Redrow Group plc
Paul Pedley, Chief Executive 0207 404 5959 (12 September)
Neil Fitzsimmons, Finance Director 01244 520044 (thereafter)
Nick Wiles/George Brenan Cazenove & Co.
0207 588 2828
Alan Parker/Gavin Partington Brunswick Public Relations
Claire de Sousa 0207 404 5959
Chairman's Statement
My statement this year contains two important elements. Firstly I am
delighted once again to report yet another record performance by the Group.
Secondly, the announcement by the Board to return surplus capital to
Shareholders by means of a Tender Offer which accompanies my decision to step
down from the Board.
Results
-------
Turnover for the year to June 2000 increased by 19% to £405m (1999, £341.6m)
producing a 20% increase in operating profit to £67.7m (1999, £56.3m).
Profit before tax increased by 21% to £67.2m (1999, £55.6m) maintaining the
Group's record of achieving a 21% compound growth rate in pre-tax profits in
the six years as a public company. Earnings per share increased by 22% to
22.5p (1999, 18.5p).
Borrowings at the year end were £11.6m, a gearing ratio of just 4.5% with
return on capital employed at 28%, consistently one of the highest in the
industry.
The Board is pleased to recommend a 10% increase in the final dividend to
3.3p which, together with the 1.65p interim dividend makes a total for the
year of 4.95p. The dividend is covered 4.5 times by earnings.
The Group produced yet another excellent performance during the year.
Housing completions rose 7% to 3,338 whilst the average selling price rose by
11% from £106,800 to £118,800. The increase in average selling price
reflects not only a strong market, particularly in the first half of the
year, but also an increasingly southern emphasis of the Groups activities.
The housing market has tempered in recent months which is a development I
very much welcome. Demand for new homes remains strong however and we
entered the current year with a forward sales position broadly in line with
last years record levels.
Planning Policy Guidance (PPG3) which was announced by the Government earlier
this year is having a significant impact on the industry. There is an
increasing emphasis towards building on brownfield land particularly in urban
areas which is a policy Redrow strongly supports. Indeed, in excess of 58%
of our completions this year were on brown field sites, broadly in line with
Government targets.
The Group's long term land policy produced clear dividends during the period
and contributed significantly to raising the current landbank to 13,500
plots, more than 4 years' supply. The growth of the southern companies is
reflected in the increased plot cost from £18,600 to £20,800. However, this
represents a further reduction from 17.8% to 17.6% of the current average
selling price underpinning Redrow's excellent margins for the future.
Redrow's forward landbank remains one of the strongest in the industry with
27,000 plots, broadly the same as last year, including 6,000 plots (1999,
5,000 plots) allocated in draft local plans.
Redrow Commercial
-----------------
Steady progress has been made in the division. The 26,000 sq ft office in
Victoria, developed jointly with Grosvenor Developments was sold during the
year and significant progress has been made at the 138,500 sq ft office
complex at Windsor. This scheme which is being developed jointly with
Norwich Union has been fully let to Centrica Plc. A further 32,000 sq ft
office and warehouse scheme in Altrincham has been pre let to ICI.
Tender Offer
------------
Introduction
------------
The Board is announcing today as part of its proposals to maximise value for
Redrow Shareholders, its intention to return surplus capital to Shareholders
through the purchase of existing issued shares by way of a Tender Offer to
all Shareholders.
As the founder of Redrow and after twenty six years building the Group into
what I believe is the leading housebuilder in the UK, I am announcing my
intention to leave with effect from the AGM on 13 October 2000.
Since I formed Redrow in 1974 the company has achieved a phenomenal growth
rate which has continued during our time as a public company. The results
announced today are further evidence of that performance and testimony to the
hard work of all members of the Redrow team. After twenty-six years I feel
the time is right in my professional life for a change, the Group is in great
shape and I feel justifiably proud of our achievements.
I believe that the Group's performance has been based on a number of key
strengths:
* An excellent management team, with a style and culture unique to Redrow.
* Strong land buying skills, resulting in a substantial low cost landbank.
* Outstanding product led by our Heritage Range of homes.
* Strong Group disciplines in the areas of land appraisal, house design, and
financial reporting.
The continued earnings momentum of the Group is further evidenced by the
results announced today. It is against this background that I feel able to
hand responsibility for the next stage of the Group's development to the
strong and well established management team.
I would like to outline the terms of the Tender Offer and to explain why the
Board, advised by Cazenove & Co., recommends Shareholders to vote in favour
of the ordinary resolution required to effect the Tender Offer. In
particular I wish to outline for Shareholders the proposed Board structure
and the business plan that will be implemented by the team going forward to
deliver value for Shareholders. Full details of the Tender Offer can be
found in the Tender Offer circular which is expected to be posted to all
Shareholders today.
The Resolution will be proposed at an Extraordinary General Meeting of Redrow
that has been convened for 29 September 2000.
Proposed Board Structure
------------------------
Following my departure from the Board at the AGM on 13 October 2000, Robert
Jones, who has been a Non Executive Director for the past three years, will
be appointed Non Executive Chairman of the Group. The Board structure will
be:
Non Executive Chairman Robert Jones
Chief Executive Paul Pedley
Finance Director Neil Fitzsimmons
Chairman - Southern Region Greg Locke
Chairman - Northern Region Barry Harvey
Non Executive Director Jim Martin
Non Executive Director Bob Williams
Background to and reasons for the Tender Offer
----------------------------------------------
The management has delivered an outstanding profit record during its six
years as a public company, achieving a compound growth in pre tax profits of
21%. This record has been achieved without recourse to equity funding and
with a balance sheet which, in the view of the Board, has been consistently
under-geared. Growth in sales volumes and a continued investment in the
Group's current and strategic landbank has been funded from internally
generated sources. Over the last three years the Group's return on capital
employed has been maintained at 28%, one of the highest in the industry. As
a result the Board believes the Group has the financial capacity to assume a
higher level of debt whilst continuing to deliver earnings growth.
The core strengths of the Group which have served Shareholders well will
continue to form the basis for our future strategy with a greater emphasis on
the following:
* Developing a more streamlined operating and reporting structure within the
Group.
* Building on the complementary nature of the Group's housing activities
enabling the strong Redrow brands to deliver a range of homes attractive
to all the distinct groupings within our customer base.
* Using the Group's commercial property expertise to focus strongly on
satisfying the increasing requirements for mixed use developments.
* Focussing the Group on its core activities in which the Board is confident
of achieving a consistently high level of return on capital employed.
The Board believes this strategy will position the Group to deliver better
returns from a reduced and more efficient capital base while, at the same
time, retaining the resources and the flexibility to deliver profitable
growth in the future. The Board believes that, from the first year, the
Tender Offer will be earnings enhancing.
The Tender Offer
----------------
The Board's proposal is to return surplus capital to shareholders through the
purchase of existing issued Ordinary shares, by way of a tender offer to all
Shareholders.
Subject to Shareholder approval Ordinary Shares will be acquired under the
Tender Offer at a price of 170 pence per share. A total of 67,620,642
shares, representing 30.0 per cent of the issued share capital of Redrow will
be acquired for cancellation pursuant to the Tender Offer. The total
consideration paid will be £115 million.
The Tender Offer will remain open from Wednesday 13th September 2000 until
3.00 pm on Friday 29th September 2000.
Director's intentions in the Tender Offer
-----------------------------------------
Bridgemere Investments, a company which I control has undertaken to tender
67,620,642 Shares representing 30.0 per cent of the Group's issued share
capital. To the extent that these shares are not sold in the Tender Offer
Bridgemere has undertaken not to sell or otherwise dispose of any of the
balance of its shares before April 2002 except with the consent of the Board
and Cazenove & Co.
Other than the Bridgemere shares, the remaining Directors have indicated that
they wish to retain their holdings and will not participate in the Tender
Offer.
Dividend Entitlement
--------------------
Shareholders participating in the Tender Offer will still receive the
proposed final dividend of 3.3 pence per Share for the year to 30th June
2000. This dividend will be paid to Shareholders on the register on 29th
September 2000. The payment date will be 24th November 2000.
Redrow is an outstanding company with a strong and energetic management team
and it is with great sadness that I am departing the Group that I founded.
The Board believes that the business plan developed by the management team
and outlined above, combined with a materially reduced equity base, is the
most appropriate approach to enhance Shareholder value. Against this
background I feel the time is right for me to hand over the Chairmanship of
the business to Robert Jones who, together with the existing management team
will lead the Group through the next stage of its development.
Over the years it has been my great privilege to work alongside what I
believe is the most outstanding team in the industry. It is through their
efforts that Redrow has achieved its most remarkable success story. May I
take this opportunity to thank each and every member of the team for their
dedication, hard work and support which has made my last twenty-six years
such a great pleasure.
Redrow has never been in better shape. The company enjoys a superb
reputation for quality, an outstanding product, a four year low cost current
landbank and a record that compares with the best in the industry. Looking
forward, I foresee a steady housing market which combined with the return of
capital announced today should deliver enhanced earnings growth for
shareholders. I am extremely confident that the management team will
continue to achieve outstanding results.
Steve Morgan
Chairman
Redrow Group plc
Consolidated Profit and Loss Account
12 months to 30 June 2000
Note 2000 1999
£m £m
Turnover - continuing operations 2 405.7 341.6
Cost of sales 313.3) 264.8)
Gross profit 92.4 76.8
Administrative expenses (24.7) (20.5)
Operating profit - continuing 2 67.7 56.3
operations
Net interest payable (0.5) (0.7)
Profit on ordinary activities 2 67.2 55.6
before taxation
Tax on profit on ordinary 3 (16.8) (14.2)
activities
Profit on ordinary activities 50.4 41.4
after taxation
Dividends (11.2) (10.1)
Retained Profit 39.2 31.3
Earnings per ordinary share - 4 22.5p 18.5p
basic
Earnings per ordinary share - 4 22.4p 18.4p
diluted
Dividends per ordinary share 6 4.95p 4.5p
There are no recognised gains or losses other than as shown above.
Redrow Group plc
Consolidated Balance Sheet
as at 30 June 2000
Note 2000 1999
£m £m
Fixed assets
Tangible assets 13.0 11.0
Investments 0.1 0.1
13.1 11.1
Current assets
Stocks and work-in-progress 7 361.6 306.0
Other current assets 13.9 4.3
Bank and cash deposits 8 1.9 7.5
377.4 317.8
Creditors due within one year
Borrowings (13.5) -
Creditors 9 (113.0) (105.4)
(126.5) (105.4)
Net current assets 250.9 212.4
Total assets less current 264.0 223.5
liabilities
Creditors due after more than one 9 (3.3) (2.9)
year
Provisions for liabilities and (1.5) (1.3)
charges
Net assets 259.2 219.3
Capital and reserves
Called up ordinary share capital 22.5 22.4
Share premium account 50.8 49.7
Revaluation reserve 0.3 0.3
Capital redemption reserve 0.2 0.2
Consolidation reserve 0.9 0.9
Profit and loss account 184.5 145.8
Equity shareholders' funds 259.2 219.3
Redrow Group plc
Consolidated Cash Flow Statement
12 months to 30 June 2000
Note 2000 1999
£m £m
Net cash inflow from operating 10 16.8 31.2
activities
Returns on investments and
servicing of finance
Interest received 0.6 0.3
Interest paid (1.2) (1.0)
Net cash outflow from returns on
investments and servicing finance (0.6) (0.7)
Taxation
Corporation tax paid (17.2) (10.2)
Net Cash outflow from Capital
expenditure and Financial (8.3) (0.8)
Investment
Dividends paid (10.5) (9.4)
Cash (outflow)/inflow before (19.8) 10.1
financing
Financing
Issue of ordinary share capital 0.7 0.1
Net cash inflow from financing 0.7 0.1
(Decrease)/increase in cash in (19.1) 10.2
period
Net cash/(debt) at 1 July 7.5 (2.7)
Net (debt)/cash at 30 June (11.6) 7.5
Redrow Group plc
Notes to the preliminary announcement
12 months to 30 June 2000
1 Basis of preparation
The above results and the accompanying notes do not constitute statutory
accounts within the meaning of Section 240 of the Companies Act 1985.
They are taken from the full accounts which have received an unqualified
report by the auditors and will be filed with the Registrar of
Companies.
2 Segmental information
2000 1999
£m £m
Turnover
Homes 396.7 334.9
Commercial 9.0 6.7
405.7 341.6
Operating profit
Homes 65.9 54.6
Commercial 1.8 1.7
67.7 56.3
Profit on ordinary activities before
taxation
Homes 65.4 53.9
Commercial 1.8 1.7
67.2 55.6
Net assets
Homes 247.9 196.7
Commercial 22.9 15.1
270.8 211.8
Net (borrowings)/cash (11.6) 7.5
Net Assets 259.2 219.3
3 Taxation
The effective rate of tax for the year is 25.0% (1999: 25.6%) and takes
account of the utilisation of tax losses within Redrow Homes (South
East) Limited which were acquired within Costain Homes Limited in 1993
as well as the lower rate of corporation tax prevailing in Jersey. At
30 June 2000, tax losses in excess of £2m remained within Redrow Homes
(South East) Limited.
4 Earnings per share
The calculation of the basic earnings per share of 22.5p (1999: 18.5p)
is based on Group profit on ordinary activities after taxation of £50.4m
(1999: £41.4m) and on the weighted average number of 10p ordinary shares
in issue of 224.3m (1999: 223.9m).
The average reflects an adjustment in respect of surplus shares held in
trust under the Redrow Long Term Share Incentive Plan.
Diluted earnings per share has been calculated in accordance with FRS14
based on the weighted average number of 10p ordinary shares in issue of
225.2m (1999: 225.1m).
5 Half year comparison
6 months 6 months to
to 30 June 2000 31 December 1999
Unit Sales 1,691 1,647
£m £m
Turnover 200.5 205.2
Operating profit 33.4 34.3
Interest payable (0.4) (0.1)
33.0 34.2
Earnings per ordinary share - 10.9p 11.5p
basic
6 Dividends
The final dividend of 3.3p will be recommended to shareholders for approval
at the Annual General Meeting on 13 October 2000. This dividend will be
paid on 24 November 2000 to shareholders whose names are on the Register of
Members at the close of business on 29 September 2000. The shares will
become ex-dividend on 25 September 2000. This dividend when added to the
interim makes a total dividend for the year of 4.95p (1999: 4.5p).
7 Stocks and work-in-progress
2000 1999
£m £m
Land held for development 236.7 186.3
Work in progress 117.0 111.5
Stock of showhomes 12.7 14.1
366.4 311.9
Cash on account (4.8) (5.9)
361.6 306.0
Work-in-progress includes £0.9m (1999: £2.2m) in respect of part exchange
properties.
8 Bank and cash deposits
Bank and cash deposits represent £1.9m held in stakeholder accounts by
solicitors relating to land acquisitions. (1999: £3.9m).
9 Amounts due in respect of development land
2000 1999
£m £m
Due within one year 27.6 27.7
Due after more than one year 3.3 2.9
30.9 30.6
10 Analysis of cash flow from operating activities
2000 1999
£m £m
Operating profit 67.7 56.3
Depreciation, including profits and
losses on 0.9 0.7
disposals of fixed assets
Increase in stock and work-in-progress (55.6) (31.3)
Decrease/(increase) in other current
assets, creditors and provisions 3.8 5.5
Cash inflow from operating activities 16.8 31.2
11 Annual General Meeting
The Annual General Meeting of Redrow Group plc will be held at St. David's
Park Hotel, St. David's Park, Flintshire, on 13 October 2000, commencing at
12.00 noon.
A copy of this statement is available for inspection at the registered
office.
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